Exxon Mobil has yielded substantial gains on upside option positions in just a few short weeks.
On Dec. 21, Investitute’s proprietary programs flagged the purchase of 3,200 January $83 calls for $1.24 to $1.87 with shares at $84.14. These were clearly new positions, as open interest in the strike was only 631 contracts before the activity appeared.
Those calls traded for $4.05 today, more than 3 times their original purchase price. The stock rose 3.4 percent in the same time period, illustrating the kind of leverage that can be achieved through options.
Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.
XOM slipped 0.42 percent to $86.77 today. The company, which is the SPDR Energy Fund’s largest holding at nearly 23 percent, has helped propel that ETF’s performance as the sector has rebounded.